Liquid level control of conical tank system is known to be a great challenge in many industries such as food processing, hydrometallurgical industries and wastewater treatment plant due to its highly nonlinear characteristics. In this research, an adaptive fuzzy PID control scheme is applied to the problem of liquid level control in a nonlinear tank process. A conical tank process is first modeled and primarily simulated. A PID controller is then applied to the plant model as a suitable benchmark for comparison and the dynamic responses of the control system to different step inputs were investigated. It is found that the conventional PID controller is not able to fulfill the controller design criteria such as desired time constant due to highly nonlinear characteristics of the plant model. Consequently, a nonlinear control strategy based on gain-scheduling adaptive control incorporating a fuzzy logic observer is proposed to accurately control the nonlinear tank system. The simulation results clearly demonstrated the superiority of the proposed adaptive fuzzy control method over the conventional PID controller.